Austin Engineering still a ‘buy”

Analysts at
Bell Potter
recently slashed the 12-month share price target of
­Austin Engineering
from $5.65 to $4.65. However, the broker maintained its “buy" recommendation given that the company is trading at a significant discount to the target price.

Bell Potter highlighted that recent quarterly sales trends from large original equipment manufacturers showed a sharp deterioration in demand for mining equipment, the main focus of Austin’s manufacturing operations.

However, it did point out that the specialised nature of Austin’s fabrication and engineering capabilities provided it with a competitive advantage.

While the broker still expects the company to deliver profit growth in 2012-13, it has downgraded its estimates by 10.4 per cent.

Forecasts for 2013-14 and 2014-15 have also been reduced by 16 per cent and 15 per cent respectively. The key takeaway for investors is that Austin’s share price has nearly halved in less than three months on the back of negative industry sentiment rather than performance and it is now trading at a discount of nearly 30 per cent to Bell Potter’s price target.